Satoru and Steve [Life Meets Art]

Yesterday two of the most important companies in games and technology, Nintendo and Apple, held keynotes back to back. The Nintendo keynote at GDC primarily concerned the 3DS and filling out its marketing story, while across town Apple unveiled the iPad 2 and its particular brand of fanfare.

However, something a little bit special happened: Satoru Iwata (CEO of Nintendo) used the last ten minutes of his keynote to deliver a talk that conveyed a complex and difficult time for game development. Then Steve Jobs told the world that Apple have paid out over two billion dollars to developers through its iOS ecosystem.

These events literally happened within minutes of each other. If you ever wanted a vertical slice of what’s happening in the games industry, this was the moment to witness.

What Iwata Said

Iwata started out with a discussion about the lack of craftsmanship. Even on huge projects, he said, many details get lost and there is not enough space given to really polish games any more. He said it was not a function of talent, but rather the pressures of the modern industry environment.

He then moved on to talent development, noting how specialisation of careers in the industry has created a class of developers who have no perspective over the whole of a game. His concern was that there was no viable path for generalist game directors to emerge, and so where would the new Miyamotos come from.

Then he took a swipe at mobile, social and other platforms. His concern was that the multiplicity of platforms would threaten the continued employment of many people working in games today. In short, would these platforms make it impossible to make a living out of games?

He centred around the dangers of diversity and the consequent difficulty of achieving visibility. With several thousand games available across consoles, and several tens of thousands available across app stores, he intoned ‘game development is drowning’.

Pennies on the Dollar

His speech was really about the tension between high and low cost, dedicated hardware and generalised platforms, and ultimately about value. In the Nintendo landscape, there have always been fewer games, better made and charged at a premium. Outside of big-N’s walls Iwata suggested that the rest of the software market was essentially devaluing itself into rubble.

As he saw it, new platforms have no motivation to maintain high value in game production and instead look for quantity. And so the premium, older games industry should protect its value. What Iwata was basically talking about was what is sometimes called a pennies-on-the-dollar problem.

In the music industry digital distribution created an explosion of content, and the fear of the major labels (and why they worry about piracy so much) is that it creates a downward pressure on price. Digital distribution allows much greater reach, but they argue that where they used to make dollars before, now they only see pennies in return. The same argument exists for book publishing and film making.

As publishing becomes automated and democratic, the distance between the creator and the audience narrows, but the barriers to entry also drop. So the number of creators increases many times over, and many of those are willing to work for free. The value of the editorial layer changes to that of a curation layer, and that requires a lot less people.

Pennies-on-the-dollar does not affect creators. Creators get very rich, or at least well-to-do, if they get their digital publishing right. The problem affects everyone else around the creators. The people who add value rather than create it find that their input is less valuable than they thought it was, and their jobs are vulnerable to automation.

Pennies-on-the-dollar does not affect Nintendo. Nintendo have a highly vertical platform with their own hardware and software, and a lot of very loyal long term fans. The problem also doesn’t affect motivated small developers working away on their single franchises. They are used to operating in an automated world and so haven’t built up the support structure of people around them yet.

Pennies-on-the-dollar affects everyone in the middle. The bulk of people that work in all media are not creators. They are middlemen. They do the selling, marketing, financing, accounting, legal, project managing, support, customer service, and so on. And even many of those that actually work in development are specialist cogs working on tools, art asset pipelines, outsource management and testing.

The games industry, like many others, is becoming a ubiquity/scarcity market. Seth Godin calls it the Seinfeld Curve. He says that there are two kinds of successful Jerry Seinfeld product:

1. The TV show which is free and ubiquitous2. The stage show, which is expensive and scarce

The problem is in the middle. The $90 Seinfeld product is a hard sell but it is where many game publishers are trying to pitch their tent. EA exists in the middle, for example, as does THQ. Their games are not valuable enough to really be considered premium (in the same way that Nintendo’s are) while at the same time they do not have the distribution means or business model to be free and ubiquitous.Those are the people for whom pennies-on-the-dollar is a really big deal.

Iwata’s Solutions

The remainder of Iwata’s talk focused on solutions. He suggested:1. Grabbing immediate attention to achieve visibility2. Easily conveyed concepts3. Simply understood unique features that people can talk about4. Focus on innovation

Nintendo have a platform, and they have fans. When they turn up on stage and announce a 3D version of Mario, or a Wii Sports, their audience already understands a great deal about who they are and what they offer. A new Zelda with a new gadget to play with is immediate to convey because everyone already knows the complicated part of what Zelda actually is.

The problem facing smaller developers is that they do not have the fan base that already knows what they are talking about. Unlike Nintendo, a normal developer showing off a roleplaying game with a green elf and a funky innovation is up against much harsher competition because the audience does not have a pre-existing connection with that game.

So if they do go down the path of immediacy and simple innovation then they will run into serious trouble because that’s what everyone else does. One glance over the multitude of identical Facebook games from tiny developers trying to be simple and easily conveyed shows the scale of the problem.

Whereas a Minecraft or a Game Dev Story is doing something different. It’s focusing on building something engaging by not appearing completely obvious from moment one. It’s innovative, but in a complex and imaginative way rather than a Zelda-with-a-new-toy sort of way. A smaller developer or publisher has to do a job that Nintendo does not have to do, which is tell a marketing story from scratch rather than build on one that they’ve been telling for decades. And that has very little to do with pennies-on-the-dollar. Instead, it’s all to do with inspiring fans.

Iwata’s talk closed with ‘Trust Your Passion’. It is exactly the right sentiment, but what does it have to do with the concerns of high value platform owners?

The Threat to Oligopoly

The other question is: Why should Nintendo care?

Over the years, Nintendo always had a strained reputation with developers outside its stable. Whether it was their strict content policy in the NES days, or inviting only a hallowed few to work with them on the N64, Nintendo have always held third parties at one remove. In addition, many third parties have found it difficult to ride Nintendo’s coat tails to success. Nintendo have always been self-reliant, and it’s worked for them not to particularly care one way or another for the general fate of the rest of the industry.

So why did Iwata make this speech?

In business terms, the console industry is an oligopoly, with only a few powers playing a grand game among one another and effectively dictating the pace of innovation in a top-down fashion. Oligopolies typically tend to have roles for all of the major competitors in their market, and those roles tend not to shift too quickly. Nintendo’s role is that of the company that leads the charge. They get to be the seat of innovation, and so they establish a contrast between themselves and their opponents, and their opponents get to be the companies that maximise the trends that Nintendo sets.

The real threat to Nintendo is not the volume of software on other platforms, or the price. The real threat is that they might lose their reputation as the seat of innovation among gamers and yield it to the iPad or some other device instead. Nintendo relies on convincing everyone that there is a ‘Nintendo Difference’ (as Edge recently put it) but that job is much harder if Nintendo find themselves lumped in a sector (consoles) that in general appears backward or out of touch.

So the larger argument is actually to do with preventing a post-console era from happening. If consoles seem to be out of touch, then all bets are off – even for Nintendo – because then the shape of the industry itself will change. Nintendo don’t want that to happen, and neither do Sony or Microsoft, because a huge amount will be lost in the process and companies like Zynga will become either kings or kingmakers.

Advocating craftsmanship and easy concepts is actually about Nintendo retaining their position, not you establishing yours.

Is Polish a Myth?

While an appeal for time to polish games is a noble one, the excitement for what’s new in games and especially who wants to invest in games is going in directions other than just Mario and Zelda. It’s games like Amnesia and Game Dev Story that are making far more waves off their own bat (rather than fuelled by marketing spend) and no amount of pleading for quality or asking developers to do what they always did and hope for the best can stem the tide.

Great software is, and always will be, the result of hard work and attention to detail. What is a myth is the idea that polish can only happen in a stage-managed fashion of the console environment. Shouting loudly, advertising a presence and so on to overcome invisibility do ordinarily not work that well, but they tend to be what publishers do when they have invested so much time polishing and building before launch.

The alternative is to polish in public. Early release, courting influencers, continuous improvement and communication with a fan base are all ways that any developer can get out there. And as their game improves and their fan base grows more voluble, so every release and update becomes a part of the polish process. As they continue to over-deliver, the fans love them and become their marketing machine.

A closed-doors culture is not in a developer’s best interests. For years the industry has relied on tactics reminiscent of the pop music industry, using a bait and switch of trailers and media attention to build high expectations.

Those kinds of tactics need exceptionally deep pockets. The alternative is to be open, rough, and operate in a live environment. That doesn’t just apply to game development, but also music, writing books (what do you think this blog is if not early builds of What Games Are book content) and more. It is safer to hide and work within publishing silos, away from the judgement of the public, but ultimately it just doesn’t work.

You still need an idea. You still need to do a lot of legwork and get your work out there, and yes, you still need to polish your work as you do so. What you don’t need to do is behave as though you only have one shot at the title. Nobody only has one shot at the title unless they’ve spent way too much money backing themselves into a corner with polish before release.

The App Alternative

Steve Jobs was present on stage yesterday to sell the iPad 2. He barely made any mention of games at all, other than to note how big the iOS install base had grown, how much revenue they’ve paid out to developers, and how the iPad 2’s technical specs had been improved.

His delivery was more powerful than Nintendo’s for one simple reason: Hope.

Nintendo may want to characterise low cost platforms as being more concerned with volume than quality, but their business model is rather like a film studio which insists that its customers not only buy its movies at premium prices, but also buy new kinds of DVD player every couple of years.

This model does not offer much hope to developers. Nintendo are likely to change platform focus quite regularly, behave oligopolistically and dominate media attention for their platform with their games. So are Sony and Microsoft. Increasingly so in fact.

Tablets, smartphones, and social networks have none of those problems. Their operating systems are more stable, they automate distribution and give developers much more control over their own destiny. And furthermore, with a light level of curation and a home page dedicated to helping users find interesting apps, Apple in particular is facilitating huge innovation in the sector (though they are far from alone in this).

Diversity of content and healthy platform installs with 70% revenue share is what all publishing is becoming. Whether it’s games, books, magazines, music or anything else that you can print, record or play, that’s where it’s all heading.

The only alternative, and the one that console makers like Nintendo have been drifting toward is vertically integrated premium products which bind hardware and software together. Wii Fit without the need for a Wii, or Kinect without an Xbox is their future. Machines that are games, with software that’s integral to what they are, is where premium game machines are headed.

That’s fine, but it’s just not a viable solution for most developers. It’s a solution for a mature market less interested in cold innovation and more interested in seeing where Zelda goes next or what Final Fantasy XX will look like. The games industry is diverging, but it is diverging along lines of opportunity rather than value, connection with customers over big budget sales techniques and small vs big. The master game makers of tomorrow are already out there.

They’re just choosing to make Game Dev Story instead of getting lost in console development hell. As well they should.

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An Irish lead designer and producer living in London, Tadhg Kelly is the author of a forthcoming book about, as he describes it, “Reclaiming games as an art, craft and industry on its own terms. The book is titled: “What Games Are.” The blog for the book is whatgamesare.com. You can also follow his tweets on Twitter (@tiedtiger).

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